Huron Chalk Company had no beginning or ending work-in-process inventories for either year.

1.	Prepare operating income statements for both years based on absorption costing.

The following information applies to the questions displayed below.] Huron Chalk Company manufactures sidewalk chalk which It sells online by the box at $28 per unit. Huron uses an actual costing system, which means that the actual costs of direct materlal, direct labor, and manufacturing overhead are entered Into work-In-process Inventory. The actual application rate for manufacturing overhead is computed each year, actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Huron's first two years of operations is as follows: Sales (In units) Production (In units) Production costs Year 1 Year 2 3,100 3,700 2,500 3,100 Varlable manufacturing costs Flxed manufacturing overhead $20,350 13,750 24,790 24,790 Selling and administrative expenses: Varlable Fixed 12,400 12.400 11,400 11,400 Selected Information from Huron's year-end balance sheets for its first two years of operation is as follows: HURON CHALK COMPANY Selected Balance Sheet Information End of Year 2 34,120 End of Year 2 34,120 Based on absorption costing Finlshed-goods Inventory Retalned earnings End of Year1 19,680 End of Year1 $ 7,320 Based on variable costing Finlshed-goods Inventory Retalned earnings 3,300 15,660 For convenlence, assume that dividends for Year 1 is $5,500 and Year 2 Is $2,700. No taxes or other expenses were Incurred for both the years